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In 2002 I accepted investments into my home based business from some aquaintences of mine. There were 8 different promissory notes (from the same investor) and I was paying 30% interest on the money invested. Suddenly in 2003 California EPA laws prohibited a chemcial that helped produce my goods and suddenly I was out of business. New plating technology has become available and I am now back in business at the same time that I have been served with a civil suit for breach of contract because 6 of the notes were never paid back. No interest was paid on any of the notes in the past 4 years.

All of the Notes were one year notes with interest only the first eleven months and a balloon payment on the 12th month. My main question is whether or not the statute of limitations for California (4 years for written contracts) would begin on the day the note(s) were due. If so, three of the notes would have reached the statute of limitations before the lawsuit was filed.

I am not looking for a way out of paying the notes, but I feel I need a barganing chip in trying to set up a payment plan to get it all cleared up.

Also, since the notes were usury how might that effect the overall validity of the lawsuit to begin with?

Asked on 6/04/07, 2:26 am

2 Answers from Attorneys

The notes weren't usury. They are investments. Did you have all of the proper disclosures in place when you took the investments? There are state and Federal requirements that must be met. If you did not, they probably can sue you for Fraud and breach of the securities act.

I would hire an attorney immediately to review this for you. You need someone who can defend you and someone who can review the initial notes to make sure you complied with the law. You may have bigger issues than just a statute of limitations defense.

The breach of contract cause of action on the notes probably took place on the date the notes were due to be paid, so you may have a statute of limitations defense there. The usury issue is also a possible defense to the payment of interest on the notes. You need a lawyer to deal with the lawsuit and put up your defenses in order to come to a reasonable settlement. Please feel free to contact me if you would like to discuss this further.